CEO Samantha Barrass says she will also be hiring behavioural scientists and data analysts to beef up consumer research.
“I want the FMA to focus on the meaningful participation of all New Zealanders and to work with the industry to support the creation of opportunities for all to share in the benefits of a quality financial sector,” she told a conference in Auckland last week on financial markets law.
This means creating a genuinely fair financial sector that people believe is working for them. The fundamental purpose of the sector, Barrass said, is to act as an “enabler of people’s lives and overall wellbeing”.
For this reason, it is important for the regulator to deepen its understanding of consumers and how they experience the services provided by financial institutions. The about-to-be-released national survey will reveal their levels of confidence and trust, she said.
“This will set a baseline for consumer perceptions prior to the introduction of the COFI regime. It will also provide useful insights to help inform our future work. This is important because COFI means we have a responsibility to anyone who has a bank account or insurance policy.”
Barrass says COFI is “relatively simple” and boils down to this: “Are your customers getting the financial products and services they need, when they need them, and do they do what a customer reasonably expects them to do?”
The FMA’s consumer research will be fed into an updated conduct guide which is expected to be released for consultation next year.
Last week the regulator gave the market a taste of its new-found appetite for research with the release of a survey on consumers’ response to ethical investments. It was an eye-opener on the way some consumes think and behave: while 68% said they wanted their funds to be invested ethically and in accordance with their values, only 26% of that group had done anything about it.
Consumers appeared to be overwhelmed by technical jargon, generally didn’t read disclosure documents (relying instead on the opinions of their friends) and found the terminology around ethical investing too confusing and difficult to navigate, the FMA said.
Barrass also used the conference to update the industry on climate change reporting which is now part of the FMA’s remit.
The XRB delivered its final exposure draft last Thursday and will publish a framework for listed companies and large banks, insurers and investment managers in December. The FMA will issue high-level guidance on compliance expectations later this year.
In response to questions from the conference floor, Barrass had a few words to say about enforcement. “If we see egregious conduct, we will always take action,” she said. Nevertheless, the focus right now is “educative”.
It was impossible for a regulator to “come in, all guns blazing” if 15%-20% of the sector was non-compliant in a significant way, she said. About 99% needed to be onside to deliver the right outcomes for consumers and investors. The time would come when the regulator wouldn’t be so understanding “but you don’t start with enforcement”.
This was not the case in all jurisdictions where, for any contact with the regulator, firms often arrived “all lawyered up” because they saw it as a “gotcha’ relationship. “That’s no way to implement a new regime,” Barrass said, “but there will be a point when we’ve done everything we can do, and we will take action.
“A conversation about non-compliance with the rules only gets you part of the way. That’s not a sign of our success as a regulator. The sign of success is [whether] we have active, confident consumers in thriving, health markets.”
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